Israeli Tax Authority Targeting Poker Players for Investigation

According to reports from one of Israel’s business websites, several Israeli poker players are currently under siege, but not because they play poker. They are allegedly the target of the Israeli government and the Israeli Tax Authority for monies that are allegedly owed to the government.

The website Globes and writer Ela Levi-Weinrib are reporting that, along with those people potentially hiding revenue from real estate sales and foreign bank accounts outside the country, Israeli poker players have come under fire for either underreporting or not reporting their incomes accurately. According to Levi-Weinrib, these players are debating with the Israeli Tax Authority over how their income should be taxed and whether they should even be taxed because of the expenses they incur. The potential tax income for the Israeli government borders on tens of millions of shekels (the monetary base for Israel).

Levi-Weinrib states that, two weeks ago, the Israeli Tax Authority stepped up investigation of gamblers but particularly poker players. Not only were their live efforts under examination but also their online winnings, whether they were tournaments or cash games. The Israeli Tax Authority contends that the players were underreporting their earnings as well as reporting it as income from lotteries or gambling, which are taxed at 35%. The government organization contends that they should have reported their earnings as a business, which is taxed at a much higher rate of 50%.

Another debate, according to Levi-Weinrib, is that players aren’t allowed to deduct all their expenses from their earnings. While negotiations reached agreement to allow for the deduction of travel and lodging for the players, there was still disagreement as to whether the players could deduct their actual tournament buy-ins and provable losses. One case is demonstrating the rift between Israeli poker players and their government.

In that case, a player claimed that he began playing as a hobby about ten years ago. In 2010, the unidentified player – at least to Levi-Weinrib and Globes – went to Cyprus for a roster of events. While he apparently hadn’t planned to play in a $25,000 “High Roller” event, tournament organizers offered the player a free entry with a special agreement: whatever he won, he would receive 10% of the winnings after deducting the entry fee and taxes to Cyprus’ government (nothing was noted about the remaining 90% of the winnings). If he lost, then he didn’t owe anything.

The unidentified player went on to win $207,000, according to Levi-Weinrib, but his contention is that he only received $17,000 of that amount – 10% minus the buy-in and the Cypriot taxes. That player then stated to the Israeli Tax Authority that he went on to lose the entire amount while playing other poker plus $1500 he had brought with him from Israel.

A bit of investigation through The Hendon Mob reveals that the player in question might be Ori Miller. Miller played in the 2010 Full Tilt Cyprus Classic $25,000 “High Roller” event, where he finished in second place to Perica Bukara. Miller earned $207,337 for that finish, but his story of “losing everything” after that is problematic in that, five days later at the same festival, he won a $1000 Pot Limit Omaha rebuy tournament for a $36,905 score. Those two tournaments make up much of the $288,916 he won in 2010 (for the record, Miller has almost $750,000 in lifetime tournament earnings).

Another issue in this case is that the “unknown player” is being taxed on the entire amount of the winnings instead of what he alleges he received. The player has a declaration of facts from the casino owner that, under penalty of lying under oath, there was the arrangement between the casino operators and the player, but the Israeli Tax Authority is “not recognizing” that unique arrangement. The difference in the case is significant as it is whether the player would be taxed at roughly $223K U. S. dollars (what the Israeli Tax Authority says the player earned) or at roughly $16K (what the player says he received).

The outcome of this case is in the air now, but in past decisions the government has come out on top. In a past case against poker professional Rafi Amit, Levi-Weinrib reports that the courts already made the determination that poker winnings would be taxed as business earnings, but this still is a point of challenge in many cases because of the status of “professional” or “recreational” player. At stake will be how Israel treats its poker professionals – and their winnings – in the future.